Working with Utilities

Photo by Werner Slocum, National Renewable Energy Lab

Background

Utilities are responsible for building and maintaining the power distribution system on which our society depends, and ensuring that safe, reliable, and affordable electric power is available at all times to all customers. Many utilities are now adding solar power to the mix of resources they own or manage. They also determine the retail rates that customers pay for electric service, and set the conditions that must be satisfied before solar projects can interconnect to the grid. This places utilities in a unique position to help develop and implement strategies for greater solar deployment.

As solar deployment grows, the economic impact on utilities and the challenges they face in managing the grid also increase. Thus, it becomes increasingly important for solar advocates and developers to understand those effects and challenges and work collaboratively with utilities to find equitable and practical solutions. Solar Market Pathways projects made progress toward that goal by:

Related Projects

In Illinois, Cook County partnered with the local utility to develop community solar pilot projects. Through this work, the utility and other project partners identified interconnection issues, implemented billing practices, and quantified grid benefits.

The Community Solar Value Project worked with the Sacramento Municipal Utility District and other utilities to develop a community solar program model that offers a new approach to demand response and forms part of a larger effort to reinvent utility systems for the 21st century.

Dominion Virginia Energy—one of the nation’s largest producers and transporters of energy—engaged a team from state government, research institutions, environmental organizations, local communities, and solar businesses to develop sustainable models for solar deployment.

The Northeast Solar Energy Market Coalition developed new resources for assessing the value of distributed solar to the utility grid and surveyed utility policies on interconnection and other key issues that influence solar deployment.

Smart Electric Power Alliance created model community solar programs that can be implemented by utilities.

Toolkit

The resources in this toolkit provide customers, third-party solar vendors, and non-utility solar program or project managers with guidance on engaging with electric utilities to accelerate solar deployment and maximize the value of solar resources. To achieve these goals, it’s crucial to understand how utilities operate, how they are regulated, what motivates them, and how distributed solar resources affect the utility. With this understanding, all parties will be better equipped to collaboratively pursue solutions that work for everyone.

How Utilities Function, How They Are Regulated, and What Motivates Them

Electric utilities play a central role in modern society, yet many people are largely unaware of how they are structured, how they are regulated, how they operate, and how they set prices for the essential services they provide to customers. The Regulatory Assistance Project’s (RAP) Electricity Regulation in the US: A (Brief) Guide provides a quick introduction to how utilities operate and how they are regulated, while the book-length version, Electricity Regulation in the US: A Guide, serves as a comprehensive reference on how electric utilities function and are regulated.

In order to effectively collaborate with a utility, customers and third parties need to understand how distributed solar systems affect the utility’s revenues and profits. The impacts of distributed solar can differ among utilities, affecting their willingness and ability to collaborate. This depends on whether the utility is a for-profit investor-owned utility or a nonprofit municipal, public power, or cooperative utility; whether the utility owns generation assets; and the status of wholesale and retail competition. Understanding Differences in Utility Views Toward Solar explores these ownership models and the presence or absence of competition, both of which affect a utility’s views on customer-owned or third-party-owned solar.

The Lawrence Berkeley National Laboratory produced a webinar examining the question of how high levels of distributed energy resources will affect the natural monopoly characteristic of an electric distribution utility, and what this might mean for the ability of utilities to profitably attract the capital needed to maintain their networks.

As part of its Solar Market Pathways project, Dominion Energy Virginia hosted four training sessions where the project’s advisory group received basic training in the areas of transmission and distribution grids, generation resources and technologies, solar program models, market and regulatory issues affecting deployment, and the current status of solar in Dominion’s service territory. The training modules offer a good example of how a utility can help stakeholders better understand the utility’s service obligations and operations, how solar deployment affects the utility, and how the utility is regulated. With this kind of training, stakeholders are better equipped to collaborate with utilities to get maximum value from solar deployments at minimum cost.

Resources

Tool:Electricity Regulation in the US: A Guide (Second Edition)Electricity Regulation in the US: A Guide (Second Edition)

Author: RAP

A detailed reference on how electric utilities function and are regulated, including broad perspectives on industry structure, regulation, ratemaking, low-income programs, and more.

Rate Design and Why It’s Important

Utilities recover their costs and, in the case of investor-owned utilities, earn a return on their investments through the rates they charge for retail electricity services, making rate design issues vitally important to utilities. At the same time, rate design partially determines whether a customer can save money and earn a return on their own investment in solar power.

A publication from the Smart Electric Power Alliance titled Ratemaking, Solar Value and Solar Net Energy Metering—A Primer provides an introduction to state utility regulation (particularly rate-setting) and principles that are considered during the valuation of incremental resource additions, specifically distributed solar resources. It is designed to ensure stakeholders engaged in these conversations are more fully informed.

Understanding and Maximizing the Value of Distributed Solar Power

Utilities, customers, and regulators need to understand the costs and benefits associated with distributed solar in order to make informed decisions about policies, rates, and investment decisions. Costs and benefits—as well as the opportunities and strategies for maximizing value—can vary based on geographic location and the level of solar deployment on the grid, and will also change with time as the power system evolves.

A website maintained by the Solar Energy Industries Association provides a compendium of reports on solar valuation methodologies and case studies from around the country. Several Solar Market Pathways projects have substantially added to the literature on this topic:

Report:Methods for Analyzing the Benefits and Costs of Distributed Photovoltaic ...Methods for Analyzing the Benefits and Costs of Distributed Photovoltaic Generation to the U.S. Electric Utility System

Author: NREL

This report describes current and potential methods that could be used to estimate the benefits & costs of distributed PV from the utility or electricity-generation system perspective.

Interconnection, Permitting, and Technical Standards

The feasibility and the costs of installing a solar energy system depend on more than just utility rates. Interconnection procedures establish standards and processes that must be met before solar or other resources can be connected to the grid. These procedures are absolutely necessary because they help ensure the safety, security, and reliability of the power system. But interconnection procedures can also increase the costs of deploying solar and can even pose barriers, as can local government permitting or zoning requirements.

Interconnection and permitting procedures vary by state and utility, but they generally specify timelines, fees, technical requirements, and steps in the review process. Some of the Solar Market Pathways projects sought to consolidate information on interconnection and permitting procedures for the benefit of project developers. For example, the Northeast Solar Energy Market Coalition project surveyed interconnection policies in nine Northeast states and published a report summarizing and comparing the results, and the City University of New York project published a guide on procedures for permitting and interconnecting energy storage systems in New York City.

Collaborating with utilities to satisfy and potentially improve interconnection and permitting procedures is crucial for successful solar deployment. Proactive, streamlined, best-practice standards and procedures can enhance the value of solar energy systems by ensuring they work with the grid. Several organizations associated with the Solar Market Pathways program have published useful guides on this topic, available below.

Collaboration Between Customers, Third Parties, and Utilities

Understanding how utilities function is a key step toward successfully accelerating the distribution of solar generation, but even more can be achieved when customers, solar advocates, project developers, and utilities collaborate to advance solar deployment.

There are many and varied examples of successful collaboration from Solar Market Pathways projects and elsewhere. A sampling of success stories and case studies can be found among the resources below that demonstrate the why and how behind each collaboration and the resulting benefits.